Ola gets new friends in battle with Uber

Gets fresh funding of Rs 3,250 cr, including from entities battling the US taxi app giant elsewhere

Ola, the India-based taxi hailing app, has got fresh funding of $500 million (Rs 3,250 crore) to ward off competition from global rival Uber, which is becoming more aggressive in India.

Since October, it has raised $1.2 billion (Rs 7,800 crore) from SoftBank, Tiger Global and DST Global, among others, to a valuation of a little over $5 bn. It caters to 102 cities, with 350,000 drivers. The firm’s business has grown 30 times in the past year.

In the latest round, Ola’s existing investors SoftBank, Tiger Global and DST Global participated, along with new ones such as British asset management firm Baille Gifford, Falcon Edge Capital and Chinese taxi hailing app Didi Kuaidi (which is fighting Uber in China).

Uber, on which Ola has modelled its business, committed $1 billion (Rs 6,500 crore) in July during the India visit of co-founder and chief executive Travis Kalanick, to expand in this country. It claims 250,000 drivers in its network in 22 cities.

“As we pursue our mission to build mobility for a billion people, we are excited about bringing on board partners who can help us get there faster,” said Bhavish Aggarwal, co-founder and chief executive of Ola.  “We will continue to build for the local market through innovative solutions like Ola Share, Ola Prime and Ola Money as we grow the mobile ecosystem in India.”

Uber and Ola both do not disclose their financials but the business model calls for money to be bled to acquire customers and partners, in the hope to dominate the market. In 2013-14, Ola reported losses of Rs 34.2 crore on revenue of Rs 51 crore, according to filings with the registrar of companies.

The fresh investment comes around six months after the company raised $400 mn. Ola has so far raised $1.3 bn in all.

“As a privileged early investor in Ola, we have been witness to the company’s amazing growth in a very short span of time. Ola’s market leadership is a result of the phenomenal value that they are creating for millions of customers and drivers...we are delighted with the way they continue to execute,” said Avnish Bajaj, managing director, Matrix India.

Uber and Ola combined have committed to spend Rs 15,000 crore or $2.3 bn to try and dominate the app-based taxi hailing market in India, hoping it would be an alternative to the country’s lack of efficient public transport. Both are utilising capital to grow their capacities here, while also battling to lock customers on to their platforms.

To boost its growth, Ola has mirrored Uber’s US strategy to create a subsidiary that directly leases cars to drivers not willing to invest in own vehicles. The Indian company said it would make an initial investment of around Rs 500 crore and plans to have 10,000 cars on road through the programme by the end of next month.

As the competition intensifies, both companies are not only increasing capacity in large markets such as Bengaluru, Mumbai, Delhi, Chennai and Hyderabad but are also entering new cities. As mentioned earlier, Uber is present in 22 cities across India and Ola counts its presence in 102. There’s a global alliance forming to take on Uber, led by Japan’s SoftBank and Chinese e-commerce giant Alibaba. Southeast Asia-based GrabTaxi, Ola, and China’s Didi Kuaidi all count SoftBank as their investors.

With Didi Kuaidi's participation in the Series F investment round in Ola, the formation of the alliance is becoming clearer.

Consolidation in the app-based taxi aggregator space is inevitable. China saw the merger of Didi Dache and Kuaidi Dache, two of the largest players in the market, back in February to create an entity that was then worth $6 billion. In India too Ola acquired rival TaxiForSure in March for $200 million as it looked to quickly build capacity and take on Uber.